investor day investor day... · 2019-12-10 · 4 safe harbor this presentation includes...

66
2019 Investor Day We keep life flowing ® December 11, 2019

Upload: others

Post on 26-Jan-2020

0 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

2019 Investor Day

We keep life flowing®

December 11, 2019

Page 2: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Welcome

We keep life flowing®

Ed VallejoVice President, Investor Relations

Page 3: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Safety MessageEd Vallejo

Page 4: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

4

Safe HarborThis presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. They are not guarantees or assurances of any outcomes, financial results of levels of activity, performance or achievements, and readers are cautioned not to place undue reliance upon them. The forward-looking statements are subject to a number of estimates and assumptions, and known and unknown risks, uncertainties and other factors. Actual results may differ materially from those discussed in the forward-looking statements included in this presentation. The factors that could cause actual results to differ are discussed in the Appendix to this presentation, in our Annual Report on Form 10-K for the year ended December 31, 2018, and subsequent filings with the SEC, including our Form 10-Q for the quarter ended September 30, 2019, as filed with the SEC on October 30, 2019.

Non-GAAP Financial InformationThis presentation includes non-GAAP financial measures. Further information regarding these non-GAAP financial measures, including a reconciliation of each of these measures to the most directly comparable GAAP measure, is included in the Appendix to this presentation.

Forward-Looking Statements

Page 5: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

5

Investor Day Agenda

8:45 am Susan Story: Overview and Strategy

9:15 am Walter Lynch: Addressing Water Quality Challenges

9:45 am 15 Minute Break

10:00 am Susan Hardwick: Focus on Capital Investment

10:30 am

11:30 am

Walter Lynch & Susan Hardwick: Regulated Operations & Financial Overview

11:45 am Q&A

12:30 pm Conference Wrap-Up

8:30 am Ed Vallejo: Welcome and Safety Message

Susan Story: Closing Remarks

Page 6: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Susan StoryPresident and Chief Executive Officer

Welcome

We keep life flowing®

Page 7: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

7

Macro Trends

Customer Technology Social Work Execution Economic

Experience above all

24/7 Personalized Service on Demand

Proactive Engagement

Connectivity and Integration

Water’s impact on Environment and

Health

AI & machine learning rapidly penetrates and

disrupts many core enterprise functions

Smart City Initiatives on the Rise

Self optimizing, software defined business models

drives competitive business advantage

More Physical Assets Integrated

with Digital Technologies

Social networks dominate as the

primary communication

channel

Community groups leverage social

networks to advance targeted

agenda (environment,

water, education, etc.)

Social Enterprises & Supporting

Regulations on the Rise

As aging work force retires, there will be fewer employees to execute workload

Dynamic teams will replace fixed organization

structures

Automation & Digital will

Transform Jobs

Recession Risk is Mixed but Rising

ESG Movement Accelerates Traction

Technology enabled companies lead

valuations

Attracting and retaining employees will require shared company purpose and strong culture

New ‘Normal’ Interest Rate Environment

Page 8: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

We keep life flowing

Trusted source of

everything water

• “ ” execution of business fundamentals

• Highest in customer satisfaction

• Set the bar for water quality, water source

monitoring, and water technology across US

• Proven and predictable financial performance and

growth

CUSTOMER

OBSESSED

The industry leader

What Won’t Change… Our Strategy: Purpose Driven. People Powered.

Safety

Trust

Teamwork

Environmental Leadership

HighPerformance

Values

Everything Water

Best in Class

Strategies

Customer Obsessed. Trusted Source of

®

8

Page 9: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

9

Connect continuously with customers & provide

personalized choices through technology and

human touch

What We Must Do Differently/Accelerate Over Next Decade:

Leverage genetic engineering to improve water

quality

Increase outreach and social integration

around “Water as Health”

Improve efficiency of operations and back-office

functions through technology

Leverage AI to improve Water Quality and

Safety

Plan for evolution and transformation of existing jobs to new jobs using AI,

robotics and reskilling training and development

Continue to address aging infrastructure through accelerated

CapEx

Page 10: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

2020-2024 Plan7-10%* EPS CAGR range

RegulatedAcquisitions

RegulatedInvestment

CAPEX

1-2%

1-2%

5-7%

Market Based Businesses

*Anchored off of 2018 Adjusted EPS (a non-GAAP measure)

Continued industry leading growth

Regulated investment continues to be the foundation of our growth

Highly fragmented water industry provides opportunity

Disciplined equity used to support increased capital

10

Addressing Water Quality Challenges

What You Will Hear Today…Our Compelling Story

Page 11: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Walter LynchChief Operating Officer

Water Quality

We keep life flowing®

Page 12: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

We keep life flowing

Water Quality Video

®

Page 13: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

13

Water Quality is essential to our business

We keep life flowing®

Emerging Contaminants

Ground Water Contamination

Algal Contamination

Chemical Spill in Water Supply

Cross Connection Control Failure

Movement of Groundwater

Plume

Abnormal Weather EventsWater Quality

Challenges

Page 14: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

14

We keep life flowing®

Walter LynchChief Operating Officer

Cheryl NortonSenior Vice President, Eastern Division & President - NJ

Kevin KirwanSenior Vice President, Chief

Environmental & Operational Excellence Officer

Dr. Lauren Weinrich Principal Scientist, Water Intelligence

Page 15: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

15

What are the Water Quality Challenges?

How is AW leading the way to ensure water is clean, safe &

reliable?

What is the value to

Regulators, Investors and Customers?

Page 16: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

15 minute break

16

Page 17: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

17

We keep life flowing®

Susan HardwickChief Financial Officer

Bruce HaukSenior Vice President, Midwest Division & President - IL

David ChoateVice President, Engineering

Page 18: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

We keep life flowing

Capital Investment Video

®

Page 19: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

19

2020-2024Capital Plan

2020-2029Capital Plan

1-yearbudget$1.7 B –$1.9 B

5-year plan

$8.8 B –$9.4 B

10-year plan

$20 B –$22 B

Including $1.6B for regulated

infrastructure

Including $8.2B for regulated infrastructure

Multiple Decades of

Investment Needs

A Focus on Capital Investment

Page 20: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

20

Drivers

• Infrastructure renewal

• Asset resiliency• Water quality

• Regulatory compliance

• Operational efficiency• Growth (acquisition and organic)

Long-termPlanning Process

• Horizon 15-20 years

• Local and centralized engineering team collaboration

• Standardized framework to assess

operational risks• Potential projects and solutions

prioritized to most efficiently and

effectively address risks / opportunities

Decades Long Infrastructure Investment

CustomerExperience

• Customers at the center of

everything we do• Affordability always considered when

planning investment

• Focused on capital efficiency • Procurement and project

delivery savings

• Prioritize projects that drives operational efficiency (every $1

saved in opex allows for $8 of

capex investment)

20

Page 21: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Walter LynchChief Operating Officer

Regulated Operations

We keep life flowing®

Page 22: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

22

National regulated footprint provides regulatory and geographic diversity

CA

HI

MO

IAIL IN

MI

KY

TN

WV

PA

NY

VA

NJ

MD

GA

51,000 miles of pipe

621 water treatment plants

130 wastewater facilities

1,000 wells

80 Dams

ASSETSas of December 31, 2018

Our Regulated Business at a Glance

Page 23: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Richard SvindlandPresident - California and Hawaii

23

Nick RoweSenior Vice President, Southeast Division & President - KY

Darlene WilliamsPresidentTennessee

Bruce HaukSenior Vice President, Midwest Division & President - IL

Matthew PrinePresidentIndiana & Michigan

Randy MoorePresidentIowa

Deborah DeweyPresidentMissouri

Mike DoranSenior Vice President, Mid-Atlantic Division & President - PA

Robert BurtonPresidentWest Virginia

Cheryl NortonSenior Vice President, Eastern Division & President - NJ

Lynda DiMennaPresidentNew York

Barry SuitsPresidentVirginia & Maryland

Our Leadership Reflects Our Communities

Page 24: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

z

Regulated System Investments

2020-2024Capital Plan

RegulatedInvestment

CAPEX

$ in billions

5-7%

$0.6 – $1.2

$8.8 – $9.4

1-2%

1-2%Market Based

Businesses

RegulatedAcquisitions

Regulated investment is the Foundation of our growth

$8.2

2020-2024 Plan: 7-10%* EPS CAGR range

*Anchored off of 2018 Adjusted EPS (a non-GAAP measure)

24

Page 25: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

25

Our Investments Ensure Safe, Reliable, Affordable Water &Wastewater Services For Our Customers

Regulated Capital Investment by year$ in billions

66%

8%

8%

8%

6%4%

Infrastructure Renewal

Operational Efficiency, Technology & Innovation

Water QualityResiliency

System Expansion Other

2020 - 2024 Average Regulated Capital Expenditures by Purpose

$0.1 – $0.2

$8.2

$1 – $2

$10 - $11$0.1 – $0.2

$0.1 – $0.2

$0.6 – $1.2

$0.1 – $0.2$0.1 – $0.2

$1.6 $1.5 $1.6$1.8

$1.7

Base Capital Investment Acquisition Capital Investment

Page 26: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Regulatory support and constructive regulation

Investing $8.2 billion in infrastructure over the next 5 years with a focus on customer bill impact

Systeminvestment

needs

Customerbill

impact

O&M and Capital

efficiencies

What can help us

Do More

26

Balancing Capital Needs & Customer Bill Impact

Page 27: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Timely Recovery Through Regulatory Mechanisms

2020-2024 Capital Plan

Traditional Recovery

41%Forward

Test Years (27%)

Infrastructure Surcharge

Mechanisms (32%)

59%

(average)

27

Page 28: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

28

41.0%

39.1%

36.6% 35.6%

2012 2014 2016

2024 Target

31.3%

Regulated O&M Efficiency Ratio*

**

* Non-GAAP Measure – See appendix for reconciliation. O&M Efficiency Ratio = Adjusted Regulated O&M Expenses (O&M Expenses is most comparable GAAP measure) / Adjusted Regulated Operating Revenues (Operating Revenues is most comparable GAAP measure). This calculation assumes purchased water revenues approximate purchased water expenses and 2010 – 2016 adjusted for TCJA** A reconciliation to a most comparable forward-looking GAAP measure is not available without unreasonable effort*** Includes organic customer connections

$980

2012

$943

2014

$948

2016

$1,015

2018

0.6% CAGR

Adjusted O&M Expenses* ($ in millions)

2010-2019 LTM

2018

46.1%

2010

35.0%

9/30/2019 LTM

$1,016

9/30/2019 LTM

$966

2010

While

adding≈450,000***

customerconnections

Disciplined Focus on Expenses

Page 29: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

We keep life flowing

Acquisition Video

®

Page 30: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

z

2020-2024 Plan: 7-10%* EPS CAGR range

*Anchored off of 2018 Adjusted EPS (a non-GAAP measure)

Regulated Acquisitions

2020-2024Capital Plan

RegulatedInvestment

CAPEX

$ in billions

5-7% $8.2

$8.8 – $9.41-2%Market Based

Businesses

1-2%Regulated

Acquisitions $0.6 – $1.2

30

Regulated Acquisitions Provide Opportunity in a

Highly Fragmented Industry

Page 31: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Highly fragmented industry

What Makes Us Different

Water Utilities Source: EPA SDWIS Federal Reports Searchwww3.epa.gov/enviro/facts/sdwis

Electric Utilities Source: Form EIA-861 detailed data fileswww.eia.gov/electricity/data/eia8

Gas Utilities Source: EPA F.L.I.G.H.T. Greenhouse Gas Emissions from Large FacilitiesGhgdata.epa.gov/ghgp/main.do#

31

Page 32: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

32

State Legislation Across our Footprint Enables Consolidation

Fair Market Value

8

CAIAINPA

NJMDIL

MO

Emerging: Water Quality Accountability

Legislation

2

Consolidated Tariff

12

NJIN

CA IAILINKY

MD

MONJNYPAVAWV

Page 33: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

American Water Acquisitions**(Customer Connections)

Selected Upcoming Acquisition OpportunitiesIncluded in Base Plan

Under agreement ≈22,300

More than 50,000 Community Water &

about 15,000 Wastewater Systems*

10,000 systems serving > 3,000

customers

Regulatory & Legislative climate

Opportunities over 5 years

≈650,000Customer Connections

* The number of water systems are available on the United States Environmental Protection Agency website and number of wastewater systems are included in the 2017 infrastructure report card.** Excludes organic growth customer connections.*** Closed water and wastewater deals counted as separate transactions and includes for 2019 20 closed systems as of December 2, 2019.

Approximate Customer Connections

822015-2019From

closed deals in

10 states≈173,000 customers

***

33

Target A

Target B

Target C

Target D

Target E

43,500

36,500

30,000

26,900

20,000

We Actively Pursue Acquisitions Using a Disciplined Approach

Page 34: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

34

Impact of AW on Communities

Scranton, PA

Ransom, IL Bel Air, MD

Page 35: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

2020-2024 Plan7-10%* EPS CAGR range

RegulatedAcquisitions

RegulatedInvestment

CAPEX

1-2%

1-2%

5-7%

Market Based Businesses

*Anchored off of 2018 Adjusted EPS (a non-GAAP measure)

Our Compelling Story

Largest and most geographically diverse water utility in the United States

Our leadership reflects our communities

Regulated investment is the foundation of our growth

Our highly fragmented industry provides opportunity

Leveraging technology to enhance customer experience and O&M/Capital efficiency

Reliability and steady execution

35

Purpose driven, delivering value to communities

Page 36: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Susan HardwickChief Financial Officer

Financial Overview

We keep life flowing®

Page 37: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

37

* Anchored off of 2018 Adjusted EPS (a non-GAAP measure). ** Adjusted EPS is a Non-GAAP measure. Please see appendix for reconciliation and further information. The GAAP range does not reflect any impact of the transactions announced on November 20, 2019

2018 2019 2020 2024

2018 Adjusted EPS

(GAAP EPS $3.15)

2019 Adjusted EPS Guidance(GAAP RANGE $3.57 - $3.65)

2020 EPS Guidance

$3.89

$3.79

7-10%*CAGR Range

$3.64

$3.56

$3.30

**

**

Continued Industry Leading EPS Growth

Page 38: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

z

2020-2024 Plan7-10%* EPS CAGR range

RegulatedAcquisitions

RegulatedInvestment

CAPEX

1-2%

1-2%

5-7%

Market Based Businesses

*Anchored off of 2018 Adjusted EPS (a non-GAAP measure)

$8.2

2020 - 2024

$0.6 – $1.2

$8.8 – $9.4

Capital Plan

Industry leading growth with regulated risk profile supported by capital light Market-Based Businesses

$18 - $19

2020 - 2029

$2 – $3

$20 – $22Capital Plan

38

2019 - 2023

$8.0 – $8.6

Capital Plan

$7.3

$0.6 – $1.2

$0.1

Growth Triangle anchored on multi decades of investment needs

Page 39: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

39

Regulated Contribution Increases from Previous Plan

14%

86%

12%

Previous 5-year Plan 2023

New 5-year Plan 2024

88%

RegulatedMarket-based

Page 40: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

40

$8.2

$0.6 – $1.2

$8.8 – $9.4

Our Stable and Predictable Capital Plan Supports Rate Base Growth

2020- 2024

Regulated System Investments

RegulatedAcquisitions

$ in billions

2020 2021 2022 2023

$12.5

$13.2

Multi decade long need for infrastructure investment

20249/302019

≈7-8%Rate base

CAGR

Capital Plan

*An approximation of rate base, which includes Net Utility Plant not yet included in rate base pending rate case filings/outcomes **Anchored off of 2018 rate base

2018

Rate Base Acceleration*

**

40

Page 41: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

41

Portfolio optimization leads to 2 capital light, cash flow positive business lines

Positive branding

Enhances customer

satisfaction

Capital light

Leverages core competencies

MSG

HOS• 1.5 million customers with 3 million

protection plan contracts• Over 40 different partnerships with

municipal water, gas and electric utilities

• Integration of Pivotal Home Solutions progressing well

• 16 bases in current footprint• Opportunity for infrastructure

upgrades on existing bases

Cash flow positive

Builds relationships

Market-Based Businesses Provide Strategic Value

Page 42: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

42

Plan Assumes

Issuance $500 million in

equity

Supports

additional regulated

capital Investment

=Proceeds from

New York American

and Keystone Transactions

+

Focus on Financing

Page 43: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

*Includes both long term and short term debt.

2019 E Previous 5-year Plan 2023

61-62%

Debt to Total Capital$8.8 to $9.4 Billion 2020-2024 CapEx Range*

BB (+/-)

BBB (+/-)A-

AA+

12

11

212

S&P Utility Credit Rating(stable outlook)

Ba2 Ba1 Baa3

Baa2

Baa1

A3 A2

1 1 1

8

15

1 1

Moody’s Utility Credit Rating (stable outlook)

43

$14

$310

$28$159

$473

$ in millions

2020 2021 2022 2023 2024

Consolidated debt maturity profile 5 years as of September 30, 2019

New 5-year Plan 2024

59-60%61%

Continued Strong Balance Sheet

Page 44: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

$1.96

6 consecutive years of ≈10% dividend growth

$1.33$1.47

$1.62

$1.78

2015 2016 2017 2018 2019 *Future dividends are subject to approval of the American Water Board of Directors **Anchored off of 2014 dividend paid

20242020

Target long term dividend growth CAGR at

High Endof 7-10% range*

44

Top Leader in Dividend Growth

Page 45: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

2020-2024 Plan7-10%* EPS CAGR range

RegulatedAcquisitions

RegulatedInvestment

CAPEX

1-2%

1-2%

5-7%

Market Based Businesses

Grow EPS long-term CAGR of 7-10%*…… One of the fastest growing utilities in the nation

*Anchored off of 2018 Adjusted EPS (a non-GAAP measure)

Top leader in the utility sector…… Combined EPS + dividend growth delivers superior total

Invest over $20 billion in capital over the next 10 years…… To ensure water quality and infrastructure growth

Maintain our predominantly regulated risk profile…… Market based businesses represent 12% of EPS in 2024

Grow dividends at high end of 7-10%* EPS range…… Top quartile utility dividend growth… Payout ratio between 50-60% of earnings

45

Our Compelling Story

shareholder return

Page 46: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Susan StoryPresident and Chief Executive Officer

Closing Remarks

We keep life flowing®

Page 47: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

47

Values matter

The “how” is just as important as the “what” for long-term financial sustainability

Water is the most precious resource for life. We aren’t just a water utility; we’re in the health and safety business

How we implement ESG principles

• Keeping employees safe and injury-free, and developing each person to his or her fullest potential

• Being a leader in environmental sustainability, caring for the planet, and leading the nation in outstanding water safety and quality

• Delivering the best, most personalized customer service with empathy and care

• Making communities better because we’re there; and being transparent, accessible and well-governed for our shareholders

Companies Do Well by Doing Good

Our ESG Philosophy

Page 48: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

48

#23 on Barron’s 100 Most Sustainable Companies; Highest ranked Utility Bloomberg Gender Equality IndexTop 100 Best for Vets Employers by Military Times

New in 2019

American Water commits to further diversity in leadership through a partnership with Paradigm for Parity

American Water awards grants to local firefighters to support the safety of local communities

West Virginia American Water’s Kanawha Valley Plant Wins 1st Place in the WV-AWWA Tap Water Taste Test

“American Water Receives 9 Directors Awards from the EPA’s Partnership for Safe Water for Excellence in Water Quality”

Philadelphia Inquirer Lists American Water as a Top-ranked Company on Diversity, Governance & Transparency

American Water earns 2019 Military Friendly® Bronze Employer designation

American Water employees contribute 4,800 volunteer hours across U.S. during month of service

United Way Awards American Water Employees the ‘Leading the Way Award’ for generosity

Environmental Business Journal RecognizesAmerican Water for Business Achievement

Peter Drucker Institute & Wall Street Journal Management Top 250 has American Water as the highest ranked utility company

Young artists earn funds for their schools through Illinois American Water’s “Imagine a day Without Water” art contest

Members of

American Water earns 2020 Military Friendly® Spouse Employer designation

Doing Well while Doing Good

Page 49: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Doing Well…

a) Source Factset: 2014 GAAP EPS – 2019 Estimate Comparable Adjusted EPS for three quarters actuals plus fourth quarter FactSet consensus estimatesb) Source Factset: 2018 Estimate Comparable Adjusted EPS – 2019 Estimate Comparable Adjusted EPS for three quarters actuals plus fourth quarter FactSet consensus estimates

c) Source Factset Historical DPS (2014 – 2018)d) Water peers include: AWR, CTWS, CWT, MSEX, SJW, WTR, YORW

Historical EPS Growth

49

8.2%

4.0%

3.2%

AWK UTY Average Water Peers

9.1%

1.8%

5.6%

AWK UTY Average Water Peers(d)

$0

$20

$40

$60

$80

$100

$120

$140

(d)

2018-2019 EPS Growth(b)

2014-2019 EPS Growth(a)

AWK Daily Stock Price

2018-2019 Dividend Growth

10.4%

5.9% 6.0%

AWK UTY Average Water Peers

2014-2019 Dividend Growth

(d)

11.2%

5.9% 5.6%

AWK UTY Average Water Peers(d)

Historical Dividend Growth

“ Doing Well… by Doing Good ”

Page 50: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

The world is changing rapidly. We must adapt or we will cease to exist

Our Purpose and Values don’t change—but our strategies and how we execute will

Safety will always be our top focus—for our employees, our customers, and our communities

Our Customers are why we exist. We have to act on that in everything we do

Our People are the heart and soul of our company and we must develop them to their fullest potential and top expertise

Companies are either Growing or Declining—there is no staying the same. We must grow to survive

Those who execute the best on the Fundamentals will win

50

Our Strategy: Key takeaways

Page 51: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Q&A Session

Page 52: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

52

We keep life flowing®

Ed VallejoVice President, Investor [email protected]

Ralph JedlickaDirector, Investor [email protected]

Abbey BarksdaleManager, [email protected]

Investor Relations Contacts

Page 53: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

Appendix

Page 54: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

54

Forward-Looking Statements

Certain statements in this presentation including, without limitation, with respect to 2019 adjusted earnings guidance; 2020 earnings guidance; dividend growth guidance; the outcome of pending or future acquisition activity; the size and timing of any future equity offerings by the Company to support its capital expenditures; the amount of proceeds to be received by the Company from its previously announced sale of New York American Water Company, Inc. and Keystone Clearwater Solutions, LLC; the amount and allocation of future capital investments and expenditures; estimated revenues and regulatory recovery from rate cases and other governmental agency authorizations; estimates regarding the Company’s projected rate base, growth, results of operations and financial condition; the projected growth and size of the regulated businesses; the potential growth, size, income and cash flows of the market-based businesses (individually or in the aggregate); the ability to capitalize on existing or future utility privatization opportunities; the Company’s projected regulated operation and maintenance efficiency ratio; macro trends, including with respect to the Company’s efforts related to customer, technology and work execution; the Company’s ability to execute its business and operational strategy; and projected impacts of the Tax Cuts and Jobs Act (the “TCJA”), are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. In some cases, these forward-looking statements can be identified by words with prospective meanings such as “intend,” “plan,” “estimate,” “believe,” “anticipate,” “expect,” “predict,” “project,” “propose,” “assume,” “forecast,” “outlook,” “future,” “pending,” “goal,” “objective,” “potential,” “continue,” “seek to,” “may,” “can,” “will,” “should” and “could” and or the negative of such terms or other variations or similar expressions. These forward-looking statements are predictions based on management’s current expectations and assumptions regarding future events. They are not guarantees or assurances of any outcomes, financial results of levels of activity, performance or achievements, and readers are cautioned not to place undue reliance upon them. The forward-looking statements are subject to a number of estimates and assumptions, and known and unknown risks, uncertainties and other factors. Actual results may differ materially from those discussed in the forward-looking statements included in this presentation as a result of the factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and subsequent filings with the SEC, including the Company’s Form 10-Q for the quarter ended September 30, 2019, as filed with the SEC on October 30, 2019, and because of factors including, without limitation: the decisions of governmental and regulatory bodies, including decisions to raise or lower customer rates; the timeliness and outcome of regulatory commissions’ actions concerning rates, capital structure, authorized return on equity, capital investment, system acquisitions and dispositions, taxes, permitting and other decisions; changes in laws, governmental regulations and policies, including with respect to environmental, health and safety, water quality and emerging contaminants, public utility and tax regulations and policies, and impacts resulting from U.S., state and local elections; weather conditions and events, climate variability patterns, and natural disasters, including drought or abnormally high rainfall, prolonged and abnormal ice or freezing conditions, strong winds, coastal and intercoastal flooding, earthquakes, landslides, hurricanes, tornadoes, wildfires, electrical storms and solar flares; the outcome of litigation and similar governmental proceedings, investigations or actions; the Company’s ability to control operating expenses and to achieve efficiencies in its operations; the Company’s ability to successfully meet growth projections for its businesses and capitalize on growth opportunities, including its ability to, among other things, acquire, close and successfully integrate regulated operations and market-based businesses, enter into contracts and other agreements with, or otherwise obtain, new customers in the Company’s market-based businesses, and realize anticipated benefits and synergies from new acquisitions; the Company’s exposure to liabilities related to environmental laws and similar matters; the use by municipalities and private landowners of the power of eminent domain or other similar authority against one or more of the Company’s utility subsidiaries; the Company’s access to sufficient capital on satisfactory terms and when and as needed to support operations and capital expenditures; and changes in federal or state general, income and other tax laws, including any further rules, regulations, interpretations and guidance by the U.S. Department of the Treasury and state or local taxing authorities related to the enactment of the TCJA, the availability of tax credits and tax abatement programs, and the Company’s ability to utilize its U.S. federal and state income tax net operating loss carryforwards.

These and other forward-looking statements are qualified by, and should be read together with, the risks and uncertainties set forth above and the risk factors and cautionary statements included in the Company’s annual and quarterly SEC filings, and readers should refer to such risks, uncertainties, risk factors and statements in evaluating such forward-looking statements. Any forward-looking statements speak only as of the date of this presentation. The Company does not have or undertake any obligation or intention to update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as otherwise required by the Federal securities laws. Furthermore, it may not be possible to assess the impact of any such factor on the Company’s businesses, either viewed independently or together, or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. The foregoing factors should not be construed as exhaustive.

54

Page 55: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

55

Non-GAAP Financial InformationThis presentation includes adjusted earnings per share (“Adjusted EPS”) both as the Company’s 2019 adjusted earnings guidance and as the 2018 earnings per share (“EPS”) compound annual growth rate anchor, both of which constitute “non-GAAP financial measures” under SEC rules. These non-GAAP financial measures are derived from the Company’s consolidated financial information but are not presented in the Company’s consolidated financial statements prepared in accordance with GAAP. Adjusted EPS as 2019 adjusted earnings guidance is defined as GAAP EPS excluding the impact of previously-reported settlement activities related to the Freedom Industries chemical spill in West Virginia. Adjusted EPS as the 2018 EPS compound annual growth rate anchor is defined as 2018 GAAP EPS, excluding the impact of (1) the gain recognized in the third quarter of 2018 on the sale of the majority of the Contract Services Group’s operation and maintenance (“O&M”) contracts; (2) a goodwill and intangible asset impairment charge related to the narrowing of the scope of the business of Keystone Clearwater Solutions in the third quarter of 2018; and (3) the June 2018 insurance settlement related to the Freedom Industries chemical spill in West Virginia.

Management believes that these non-GAAP financial measures are useful to investors because they provide an indication of the Company’s baseline performance excluding items that are not considered by management to be reflective of the Company’s ongoing operating results. Management believes that these non-GAAP financial measures will allow investors to understand better the operating performance of the Company’s businesses and will facilitate a meaningful year-to-year comparison of its results of operations. Although management uses these non-GAAP financial measures internally to evaluate the Company’s results of operations, management does not intend results excluding the items to represent results as defined by GAAP, and investors should not consider them as indicators of performance. These non-GAAP financial measures are derived from the Company’s consolidated financial information but are not presented in its consolidated financial statements prepared in accordance with GAAP, and thus they should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, the Company’s definition of Adjusted EPS may not be comparable to the same or similar measures used by other companies, and, accordingly, they may have significant limitations on their use.

This presentation also includes adjusted regulated segment O&M efficiency ratios, both historical and forward-looking, which, in addition to the pro forma adjustment for the impact of the Tax Cuts and Jobs Act (the “TCJA”), excludes from its calculation (i) estimated purchased water revenues and purchased water expenses, (ii) the impact of the Freedom Industries chemical spill in 2014 and certain related settlement activities recognized in 2016, 2018 and 2019, (iii) the estimated impact in 2012 and 2014 of weather, and (iv) the allocable portion of non-O&M support services costs, mainly depreciation and general taxes. Also, an alternative presentation of this ratio has been provided for each of 2010, 2012, 2014 and 2016 which includes the pro forma adjustment for the impact of the TCJA and includes for 2012, 2014 and 2016 the impact of the Company’s implementation of Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit, on January 1, 2018. These adjusted O&M efficiency ratios constitute “non-GAAP financial measures” under SEC rules. These ratios are derived from the Company’s consolidated financial information but are not presented in its consolidated financial statements prepared in accordance with GAAP. These non-GAAP financial measures supplement and should be read in conjunction with the Company’s GAAP disclosures but should not be considered an alternative to the GAAP measures. Management believes that the presentation of the Company’s adjusted O&M efficiency ratios is useful to investors because it provides a means of evaluating the Company’s operating performance without giving effect to items that are not reflective of management’s ability to increase efficiency of the Company’s regulated operations. In preparing operating plans, budgets and forecasts, and in assessing historical and future performance, management relies, in part, on trends in the Company’s historical results and predictions of future results, exclusive of these items. The Company’s definition of these ratios may not be comparable to the same or similar measures used by other companies, and, accordingly, these non-GAAP financial measures may have significant limitations on their use. Management is unable to present a reconciliation of adjustments to the components of the forward-looking O&M efficiency ratio without unreasonable effort because management cannot reliably predict the nature, amount or probable significance of all the adjustments for future periods; however, these adjustments may, individually or in the aggregate, cause the non-GAAP financial measure component of the forward-looking ratio to differ significantly from the most directly comparable GAAP financial measure.

Set forth in this appendix are tables that reconcile Adjusted EPS as 2019 adjusted EPS guidance and as the 2018 EPS compound annual growth rate anchor, each to GAAP EPS, and each of the components of its historical O&M efficiency ratios to its most directly comparable GAAP financial measure.

All references throughout this presentation to EPS refer to diluted EPS attributable to common shareholders.

55

Page 56: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

56

Energy Use

• GHG emissions: Goal of reducing 40% by 2025 from 2007 baseline, after achieving approximately 31% reduction through 2018

• Design for efficiency: enhanced pump, lighting and process design standards

• Construct for efficiency: sustainable construction standards and methods

• Operate for efficiency: enhanced best operating practices, leak detection and repair procedures

• Maintain for efficiency: computerized maintenance management systems and preventive maintenance systems

Water Use

• San Clemente dam: Deconstruction to restore “run of river”

• Monterey Peninsula Water Supply Project: Recycling, reuse and desalination using marine life friendly slant wells

• Customer conservation: residential customers have saved about 1,100 gallons per customer per year—or 3.3 billion gallons annually, about 12.5 million cubic meters—through conservation and efficiency measures

Water Policy Leadership

• Capital investment: Expect 10-year $20.0 billion to $22.0billion total capital investment to address aging infrastructure, reduce/eliminate leaks, improve cyber/physical security, and increase resiliency of critical assets due to climate variability

• Research & Development: scientists dedicated to research and partnering with water research foundations, on water quality and technology-water source monitoring

• Collaboration: EPA, CDC, state DEPs and other agencies to support effective environmental, health and safety, and water quality standards and regulations

“E”: Environment

Page 57: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

57

Our People Our Customers

• Customer data protection: we do not share or sell personal customer data

• Technology development: ensuring a personalized positive experience

• Customer satisfaction: Top Quartile in the water industry

• Online communities as of 10/2019:

Our Communities

• Community service: More than 5,000 hours in 2018 for company-sponsored events

• Charity support: Sponsored national workplace giving campaigns with the United Way and Water For People, as well as supporting our employees’ own charitable endeavors through the American Water Charitable Foundation

• American Water Charitable Foundation:

- Union sportsmen’s

alliance projects

- Parks partnerships

projects

- Employee match

program

- Keep Communities Flowing

• Training: During 2018, nearly 80,000 hours of annual employee safety training

• Employee engagement: Frequent surveys with formalized employee action teams

• Frontline employees: driving technology development

• Union representation: As of December 31, 2018, 49% of workforce in jobs represented by unions

• Diverse job candidate pools: During 2018, 86% of job requisitions had a diverse candidate pool, with more than 52% of transfers/promotions filled by minority, female, veteran or disabled individuals

• Culture: Diverse, inclusive culture characterized by respect and dignity of every employee

87,058 fans

32,076 followers

7,610,976 views

17,911 followers

57

“S”: Social Responsibility

Page 58: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

5858

Board & Committee Structure

• Ensuring independence: board is led by an independent, non-executive chair

• Safety, Environmental, Technology, Operations (SETO) Board Committee

• Engaging board sufficiently: board met 13 times in 2018

• Board engages directly with front-line employees: Off-site board meetings twice a year, external stakeholder receptions, dinners and meetings with “high potential” leaders periodically

• Engaging investors: robust program for management and board engagement

Diverse

• Achieving gender parity: highest proportion of female board members among S&P 500 companies in 2017

• 54.5% female board members as of July 2019

• 6 of 11 directors <4 years on board as of July 2019

Demonstrated & Representative Expertise

• Utility experience and expertise

• Internationally recognized cyber security expert

• Financial expertise

• Retired CEO experience

• Operational and manufacturing experience and expertise

• Global experience

“G”: Governance

Page 59: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

59

Rates Effective Since January 1, 2019

Total $93

$48Pennsylvania (DSIC) 10/1/2019 6

Tennessee (QIIP, EDI, SEC) 9/1/2019 1New York (SIC) 8/1/2019 2

Pennsylvania (DSIC) 7/1/2019 3

New Jersey (DSIC) 7/1/2019 15Missouri (ISRS) 6/24/2019 9

Pennsylvania (DSIC) 4/1/2019 2

West Virginia (DSIC) 1/1/2019 2Illinois (QIP) 1/1/2019 $8

Infrastructure Charges

$45

(a) On February 5, 2019, the Maryland Public Service Commission issued an Order authorizing an increase of $1.45 million effective February 5, 2019.(b) On February 8, 2019, the West Virginia Public Service Commission issued an Order authorizing an increase of $19 million effective February 25, 2019, this excludes $4 million in DSIC revenues.(c) Total Rate award for this rate case was $20.9 million with increases of $3.6, $4.8, $4.6 and $7.9 million effective 6/1/2017, 4/1/2018, 4/1/2019 and 4/1/2020, respectively. The Rate award for the rate case was adjusted to $17.9 million with increases of $2.8, $4.1, $3.9 and $7.1 million effective 6/1/2017, 4/1/2018, 4/1/2019 and 4/1/2020, respectively, to reflect an adjustment to property taxes. (d) 2019 step rate increases approved effective May 11, 2019. On August 23rd, 2019 CAW filed a tier 2 advice letter to request a true-up of interim rates. This interim rate true-up included differences between interim rates and adopted rates from the beginning of test year 2018 through the 2019 escalation year up to the May 11, 2019 effective date of step rates. If authorized, the relief requested would become effective on September 22, 2019.(e) The overall increase is $17.5 million in revenues combined over two steps, the first step is effective 7/1/2019 in the amount of $4.4 million and the second step should be effective 5/1/2020 in the amount of $13.1.

Indiana 7/1/2019 4(e)

Kentucky 6/28/2019 13California 5/11/2019 4(d)

New York 4/1/2019 4(c)

West Virginia 2/25/2019 19(b)

Maryland 2/5/2019 $1(a)

Rate Cases & Step Increases Date EffectiveAnnualized Revenue

Increases Effective in 2019

Page 60: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

60

Rate Filings Awaiting Final Order

$58Total Awaiting Final Order:

$197$22

21211/15/2019Tennessee (QIIP, EDI, SEC)

801011/15/2019New Jersey (DSIC)

5568/26/2019Missouri (ISRS)

$41$4 (c)6/28/2019West Virginia (DSIC)

Infrastructure Charges Filed

$1,486$36

5

26(b)

11/12/2019Case No. A. 16-07-002California 601

7/1/2019Case No. A. 19-07-004California 689

$19610.80%$5(a)11/2/2018Case No. PUR-2018-00175Virginia

Rate Cases Filed Company Docket/Case Number Date FiledRequested Revenue

IncreaseROE

RequestedRate Base

(a) The requested increase filed for was $5.6 million, which includes $0.9 million from infrastructure filings. Interim rates were effective on May 1, 2019, under bond and subject to refund.(b) Test Year 2021 revenue requirement requests an increase of $26.0 million. This excludes the step rate and attrition rate increase for 2022 and 2023 of $9.8 million and $10.8 million, respectively. The total revenue requirement request for the three year rate case cycle is $46.6 million.(c) The DSIC revenue requirement is $3.7 million increase which is offset by $0.1 million related to Boone-Raleigh Acquisition Settlement adjustment.

Page 61: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

61

Regulatory Information

CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI

1/1/2018(a)Effective Date of Rate Case 1/1/2017 7/1/2019 6/28/2019 5/28/2018

55.39%(a)Authorized Equity 49.80% 53.41%(c) 48.90% 52.80%(d)

9.20%(a)Authorized ROE 9.79% 9.80% 9.70%(e) 10.00%(e)

$498,135Authorized Rate Base* $883,386 $1,061,192 $443,654 $1,249,293(b)

NEW JERSEY NEW YORK PENNSYLVANIA VIRGINIA WEST VIRGINIA

10/29/2018(g)Effective Date of Rate Case 6/1/2017 1/1/2018 5/24/2017(f) 2/25/2019

54.00%Authorized Equity 46.00% 53.75%(d) 46.09% 48.40%(h)

9.60%Authorized ROE 9.10% 10.00%(e) 9.25% 9.75%

$2,950,471Authorized Rate Base* $275,463 $3,162,597(b) $155,747 $652,900(h)

*Rate Base stated in $000s

(a) On March 22, 2018, Decision 18-03-035 set the authorized cost of capital for 2018 through 2020. CA has a separate Cost of Capital case which sets the rate of return outside of a general rate proceeding. (b) The Rate Base listed is the Company's view of the Rate Base allowed in the case, the Rate Base was not disclosed in the Order or the applicable settlement agreement.(c) The Authorized Equity excludes cost-free items or tax credit balances at the overall rate of return which lowers the equity percentage as an alternative to the common practice of deducting such items from rate base.(d) The equity ratio listed is the Company's view of the equity ratio allowed in the case, the actual equity ratio was not disclosed in the Order or the applicable settlement agreement.(e) The ROE listed is the Company's view of the ROE allowed in the case, the ROE was not disclosed in the Order or the applicable settlement agreement.(f) Interim rates were effective April 1, 2016 and received final Order May 24, 2017.(g) Interim rates were effective June 15, 2018 and final rates effective October 29, 2018.(h) The Rate Base and equity ratio listed is the Company's view of what was allowed in the case, there were multiple versions disclosed by the parties in the applicable settlement agreement.

Page 62: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

62

53,10042,20010,90020Total

500-5001West Virginia

13,10010,4002,7005Pennsylvania

* Customer Connections are rounded** This includes the Alton, IL acquisition, which represents 23,000 customer connections, due to bulk contracts. Connections to the system will be approximately 11,000

StateNumber of

SystemsWater Customer

ConnectionsWastewater Customer

ConnectionsTotal Customer

Connections

1,8001,800-1New Jersey

2001001004Missouri

6002004002Kentucky

6,200-6,2002Indiana

30,20029,7005004Illinois**

500-5001California

2019 Closed Acquisitions* as of December 2, 2019

Page 63: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

63

22,3008,10014,20025Total

300-3001West Virginia

200-2001Tennessee

2,1002,100-2Pennsylvania

2,8002,800-1New Jersey

100100-3Missouri

500500-1Indiana

* Customer Connections are rounded

StateNumber of

SystemsWater Customer

ConnectionsWastewater Customer

ConnectionsTotal Customer

Connections

3,5002,4001,1008Illinois

100-1001Iowa

200200-1Hawaii

12,500-12,5006California

Pending Acquisitions* as of December 2, 2019

Page 64: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

64

Recurring transactions typically included in our annual guidance, some of which can result in quarterly variability:

* Acquisition related expenses* Compensation adjustments which are typically timing and driven by accounting standards* Insurance expense variability primarily driven by claims activity* Land sales within the regulated footprint* Legal expense variability* Tax adjustments which are largely timing in nature, driven by accounting standards* Certain Regulatory outcomes that are not unusual or precedent setting

Five Year History of Adjustments, where material, to GAAP results for reporting purposes:

* Gain on Sale of a Business Line or Segment* Impairments of a Business Line or Segment* Legal settlements and associated activities* Debt Extinguishments* Material tax law changes

For the Nine Months

Ended September 30,

2019 2018 2017 2016 2015 2014 2013

Diluted earnings per share (GAAP):

Net income attributable to common shareholders $2.89 $3.15 $2.38 $2.62 $2.64 $2.39 $2.07

Adjustments:

Gain on sale of portion of Contract Services Group contracts - (0.08) - - - - -

Income tax impact - 0.02 - - - - -

Net adjustment - (0.06) - - - - -

Keystone Impairment - 0.31 - - - - -

Income tax impact - (0.08) - - - - -

Net loss attributable to noncontrolling interest - (0.01) - - - - -

Net adjustment - 0.22 - - - - -

Freedom Industries Settlement Activities (0.02) (0.11) (0.12) 0.36 - 0.06 -

Income tax impact 0.01 0.03 0.05 (0.14) - (0.02) -

Net adjustments (0.01) (0.08) (0.07) 0.22 - 0.04 -

Early Debt Extinguishment at Parent - - 0.03 - - - 0.19

Income tax impact - - (0.01) - - - (0.05)

Net adjustments - - 0.02 - - - 0.14

Impact of re-measurement from the TCJA - 0.07 0.70 - - - -

Total net adjustments (0.01) 0.15 0.65 0.22 - 0.04 0.14

Adjusted diluted earnings per share (non-GAAP) $2.88 $3.30 $3.03 $2.84 $2.64 $2.43 $2.21

Consolidated Adjusted EPS

For the Twelve Months

Ended December 31,

American Water’s Historical Adjustments to GAAP

Page 65: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

65

Low

End

High

End

Diluted earnings per share:

Earnings guidance range (GAAP) $ 3.57 $ 3.65

Adjustment:

Freedom Industries liability reduction (0.02) (0.02)

Income tax impact 0.01 0.01

Net adjustment (0.01) (0.01)

Adjusted earnings guidance range (non-GAAP) $ 3.56 $ 3.64

2019 EPS Guidance Range

Reconciliation Table: Adjusted Earnings Per Share Guidance Range*

* The GAAP range does not reflect any impact of the transactions announced on November 20, 2019

*

Page 66: Investor Day Investor Day... · 2019-12-10 · 4 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private

66

Regulated Segment O&M Efficiency Ratio

(A Non-GAAP Unaudited Number) ($ in millions)

Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 $1,526

Less:

Operations and maintenance expense – Market Based Operations 257 256 289 372 362 398

Operations and maintenance expense – Other (61) (56) (51) (44) (42) (49)

Total operations and maintenance expense – Regulated Businesses $1,095 $1,130 $1,112 $1,176 $1,159 $1,177

Less:

Regulated purchased water expense 100 110 122 122 133 133

Allocation of non-operation and maintenance expenses 29 35 39 30 31 32

Impact of Freedom Industries activities - - 10 65 (20) (4)

Estimated impact of weather - 5 (2) - - -

Adjusted operations and maintenance expense – Regulated Businesses (a) $966 $980 $943 $959 $1,015 $1,016

Total operating revenues $2,555 $2,854 $3,011 $3,302 $3,440 $3,558

Less:

Operating Revenues – Market Based Operations 295 307 355 451 476 540

Operating Revenues – Other (26) (17) (18) (20) (20) (22)

Total pro forma operating revenues – Regulated Businesses $2,286 $2,564 $2,674 $2,871 $2,984 $3,040

Less:

Regulated Purchased Water expense* 100 110 122 122 133 133

Plus:

Freedom Industries chemical spill in West Virginia - - 1 - - -

Estimated impact of weather - (47) 17 - - -

Adjusted pro forma operating revenues—Regulated Businesses (b) $2,186 $2,407 $2,570 $2,749 $2,851 $2,907

Adjusted O&M efficiency ratio—Regulated Businesses (a)/(b) 44.2% 40.7% 36.7% 34.9% 35.6% 35.0%

Adjusted operations and maintenance expense – Regulated Businesses $966 $980 $943 $959

Less:

Impact of adoption of ASU 2017-07 - 39 (8) 12

Adjusted operations and maintenance expense – Regulated Businesses (c) $966 $941 $951 $947

Adjusted operating revenues—Regulated Businesses $2,186 $2,407 $2,570 $2,749

Less pro forma adjustment:

Pro forma adjustment for impact of the TCJA** 89 112 137 161

Adjusted pro forma operating revenues—Regulated Businesses (d) $2,097 $2,294 $2,433 $2,588

Adjusted O&M efficiency ratio—Regulated Businesses (c)/(d) 46.1% 41.0% 39.1% 36.6%

LTM

9/30/2019

FY

2018

FY

2010

FY

2012

FY

2014

FY

2016

* Calculation assumes purchased water revenues approximate purchased water expenses** Calculation of Estimated tax reform = Revenue Requirement with new Effective Tax Rate (taxes grossed up) – Revenue Requirement with old Effective Tax Rate*** Includes the impact of the Company’s adoption of ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit, on January 1, 2018.

***

Reconciliation Table:Regulated Segment O&M Efficiency Ratio